It can be pretty stressful to get a loan when your credit is poor or you do not have a credit history. Perhaps you made a few mistakes in your early 20s or just getting started. Whatever the case, you can get a loan under these circumstances —but it may take you a couple of extra steps to do so.
If you’re looking for how to get a loan with bad credit or how to get a loan with no credit, we have the answers for you.
What Can a Loan Be Used For?
There are many reasons why you may seek out a loan.
- If you unexpectedly have car repairs that must be taken care of immediately, a loan can be the difference between having transportation and being stranded.
- You might need to use the money for home repairs before selling your home or to live in it safely.
- Perhaps you have a medical bill you have put off paying — a loan can prevent it from further affecting your credit.
- Sometimes you need to consolidate various debts; getting a loan can significantly reduce your monthly payment and ease the burden of multiple interest rates.
Whatever the case, a loan can relieve your stress and lessen the pressure you may feel.
What Makes a Credit Score Bad
Your credit score comprises different credit data that each affect your score differently. FICO scores are calculated by looking at your payment history (35%), debt you owe (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
According to Experian, different ratings fall into these ranges:
- 300 - 499 Very Poor
- 500 - 500 Poor
- 601 - 660 Fair
- 661 - 780 Good
- 781 - 850 Excellent
If you have bad credit, know that you aren’t alone. Your credit score is affected by making late payments, ignoring your credit card bills, having an account sent to collections, defaulting on a loan, a home foreclosure, and maxing out your credit card. Other factors that contribute to a lower score include not having a credit mix.
Get a Loan Cosigner
Sometimes, if you have bad credit or no credit, you can get approved for a loan with a cosigner. This works for some people if they are confident they can pay the loan off according to the terms of the loan. In other cases, this isn’t such a great idea.
Whoever cosigns your loan will become responsible if you miss a payment. This can be a detriment to relationships if things go south and you’re unable to pay. It is also risky to attach your loan to another person’s credit.
The Benefit of a Secured Loan
A secured loan is invaluable if you strive to build or rebuild credit. Specifically, share certificate loans can be extremely helpful. These kinds of loans are secured by the money in your share savings account. The terms are flexible and can be negotiated between 1 and 60 months. They also provide you with a stable way to build credit because your savings account is connected.
To apply for a share certificate loan, you will need the following:
- Proof of income
- A record of current debts
- Personal information, including email address, address, social security number, and phone number
- A certificate or account form verifying your certificate of deposit
You may be wondering if you’re allowed to pull money out of your savings account once you apply and are approved. The short answer is no. This type of loan is backed by the funds in your account and is essentially “locked-in” until the terms of your loan have been met and you have paid it off.
Building Credit With a Share Certificate Loan
You can qualify for a share certificate loan with a lower credit score than other loans. They are an excellent alternative if you’re looking to establish, build, or repair credit. When you make payments on time, it is reported to credit bureaus. The most significant portion of your credit score comes from making payments on time. Each on-time payment boosts your credit score and shows you are reliable.
Managing Credit With Greater Texas Credit Union
Your credit can always be repaired or built through healthy financial decisions. To better handle your finances, try creating a spreadsheet with all of your bills. Note your fixed expenses, variable expenses, debts, and due dates. It is helpful to plan out which accounts you will pay and when you will pay them.
It’s always important to manage your debt with strategy. Try to keep your debt-to-income lower and set money aside for an emergency fund. A good rule of thumb for credit cards is to keep your utilization rate under 30%. If you go over, try to make a payment before it is reflected on your bill.
Learn about our loans for bad or no credit below!